Small Business PBM-9-12-2023

Presentation

•

Computers

•

12th Grade

•

Hard

Steven Howard

Used 2+ times

FREE Resource

35 Slides • 23 Questions

Business in Action: Thriving in the Digital
Enterprise

Tenth Edition

Chapter 6

Entrepreneurship and

Small-Business

Ownership

Learning Objectives (1 of 2)

6.1 Highlight the contributions small businesses make to
the U.S. economy.

6.2 List the most common reasons people start their own
companies, and identify the common traits of successful
entrepreneurs.

6.3 Explain the importance of planning a new business,
and outline the key elements in a business plan.

6.4 Identify the major causes of business failures, explain
what pivoting means and identify sources of advice and
support for business owners.

Learning Objectives (2 of 2)

6.5 Discuss the principal sources of small-business private
financing.

6.6 Explain the advantages and disadvantages of
franchising.

6.7 Define machine learning and deep learning, and
describe their importance to contemporary business.

The Big World of Small Business

• Small business

– A company that is independently owned and

operated, is not dominant in its field, and employs
fewer than 500 people (although this number varies
by industry)

Economic Roles of Small Business

• They provide jobs.

• They introduce new products.

• They meet the needs of larger organizations.

• They inject a considerable amount of money into the

economy.

• They take risks that larger companies sometimes avoid.

• They provide specialized goods and services.

Exhibit 6.1

Qualities Shared by Successful Entrepreneurs

Multiple Choice

_______ financing is the money needed to pay for the current operating activities of a business.

Long-Term

Owner

Short-Term

Start-up

Multiple Choice

Many small businesses have an advantage over larger businesses because they are better able to _____

Provide unique services to customers

Market their products

Raise large amounts of financial capital

Mass produce products

Characteristics of Small Businesses

• Most small firms have a narrow focus.

• Small businesses have to get by with limited resources.

• Small businesses often have more freedom to innovate.

• Entrepreneurial firms find it easier to make decisions

quickly and react to changes in the marketplace.

Multiple Choice

Which of the following is not a common reason for the failure of small businesses?

A lack of sufficient start-up money

Lack of management experience

Shortage of skilled workers

failure to manage credit offered to customers

The Entrepreneurial Spirit

• Entrepreneurial spirit

– The positive, forward-thinking desire to create

profitable, sustainable business enterprises

Why People Start Their Own Companies

• More control over their futures

• Tired of working for someone else

• Passion for new product ideas

• Pursue business goals that are important to them on a

personal level

• Inability to find attractive employment anywhere else

Exhibit 6.2 (1 of 3)

Business Start-Up Options

Start-Up
Strategy

Financial

Outlay
at Start-

Possibilities
for Borrowing

Start-Up
Capital or

Getting
Investors

Owner’s
Freedom

and

Flexibility

Business
Processes

and

Systems

Support
Networks
Workforce

Customer

Base, Brand
Recognition,

and Sales

Create a
new,
independ
ent
business

Some
businesses
can be
started
with very
little cash;
others,
particularly
in
manufactur
ing, may
require a
lot of
capital

Usually very
limited; most
lenders and
many investors
want evidence
that the business
can generate
revenue before
they’ll offer
funds; venture
capitalists invest
in new firms, but
only in a few
industries

Very high,
particularly
during
early
phases,
although
low capital
can
severely
restrict the
owner’s
ability to
maneuver

Must be
designed
and
created
from
scratch,
which can
be time-
consuming
and
expensive

Suppliers,
bankers,
and other
elements of
the network
must be
selected;
the good
news is that
owners can
select and
recruit ones
they
specifically
want

Must be
hired and
trained at
the owner’s
expense

None; must
be built from
the ground
up, which can
put serious
strain on
company
finances until
sales volume
builds

Multiple Choice

What is the first and primary question you should ask yourself before starting a small business?

Am I business savvy

Where will I get the money

Where should my business be located

Do I have what it takes

Exhibit 6.2 (2 of 3)

Business Start-Up Options

Start-Up
Strategy

Financial

Outlay

at Start-Up

Possibilities
for Borrowing

Start-Up
Capital or

Getting
Investors

Owner’s
Freedom

and

Flexibility

Business
Processes

and

Systems

Support
Networks
Workforce

Customer

Base, Brand
Recognition,

and Sales

Buy an
existing
independe
nt
business

Can be
considerable;
Some
companies
sell for
multiples of
their annual
revenue, for
example

Banks are
more willing to
lend to
established,
profitable
businesses,
and investors
are more likely
to invest in
them

Less than
when
creating a
new
business
because
facilities,
workforce,
and other
assets are
already in
place more
than when
buying a
franchise

Already in
place,
which can
be a plus or
minus,
depending
on how well
they work

Some
elements
will
already be
in place
but may
need to be
upgraded

Already in
place,
which could
be a
positive or a
negative,
but at least
there are
staff to
operate the
business

Assuming that
the business
is at least
somewhat
successful, it
has a
customer
base with
ongoing sales
and some
brand
reputation
(which could
be positive or
negative)

Exhibit 6.2 (3 of 3)

Business Start-Up Options

Start-Up
Strategy

Financial

Outlay
at Start-

Possibilities
for Borrowing

Start-Up
Capital or

Getting
Investors

Owner’s
Freedom

and

Flexibility

Business
Processes

and

Systems

Support
Networks
Workforce

Customer

Base, Brand
Recognition,

and Sales

Buy into a
franchise
system

Varies
widely,
from a few
thousand
to several
million
dollars;
most well-
known
franchises
require
low- to
mid-six
figures

Varies, but
many
franchisors do
not allow
franchisees to
buy a franchise
with borrowed
funds, so they
must have their
own capital;
many have
minimum
liquidly and net
worth criteria

Low to
very low;
most
franchisor
s require
rigid
adherence
to
company
policies
and
processes

One of the
key
advantage
s of buying
a franchise
is that it
comes with
an
established
business
system

Varies;
some
franchise
companies
specify
which
suppliers a
franchisee
can use

Must be
hired and
trained, but
many
franchisors
provide
training or
training
support

Customer base
and repeat
sales must be
built up, but
one of the
major
advantages of
a franchise is
established
brand
recognition

Blueprint for an Effective Business
Plan (1 of 3)

• Business plan

– A document that summarizes a proposed business

venture, goals, and plans for achieving those goals

Multiple Choice

This is a proposal that describes a new business.

Business Plan

Blueprint

Venture

Opportunity

Multiple Choice

Data that describes a group of people in terms of their age, marital status, gender, etc.....

survey

data

demographics

business plan

Multiple Choice

In this type of business, you given the right to sell a company's goods/services in a particular geographic area.

franchise

corporation

partnership

sole proprietorship

Multiple Select

What is the purpose of a business plan? (hint: choose 2 correct answers)

To document your financial activity during one year

Legal document to be filed with the SEC

States the purpose and vision of your company

States the amount of capital you need to run the company

Blueprint for an Effective Business
Plan (2 of 3)

• Summary

• Mission and objectives

• Company overview

• Products and services

• Management and key personnel

• Target market

• Marketing strategy

Blueprint for an Effective Business
Plan (3 of 3)

• Design and development plans

• Operations plan

• Start-up schedule

• Major risk factors

• Financial projections

• Exit strategy

Exhibit 6.3

Why New Businesses Fail

Strategic Issues

Leadership Issues

Marketing and Sales Issues

Financial Issues

Little or no demand:
Company introduced a
product that few, if any,
customers wanted.
Lack of strategic planning
or a viable business
model:
Owners didn’t think through
all the variables needed to
craft a viable business
strategy.
Failure to pivot: Owners
missed (or failed to take) an
opportunity to pursue a
better opportunity.
Overpowering
competition:
Company might have been
on the right track, but the
competition simply did
things better.

Managerial incompetence:
Owner didn’t know how to plan,
lead, control, or organize.
Lack of relevant experience:
Owner may have been
experienced in business but not
in the particular markets or
technologies that are vital to the
new firm’s success.
Inability to make the transition
from employee to
entrepreneur: Owner couldn’t
juggle the multiple and diverse
responsibilities or survive the
lack of support that comes with
going solo.
Motivational collapse:
Entrepreneur burned out before
the business became self-
sustaining.

Ineffective marketing: Small
companies—especially new small
companies—face a tremendous
challenge getting recognition in
crowded markets.
Uncontrolled growth: Company
added customers faster than it
could handle them, leading to
chaos, or might have even “grown
its way into bankruptcy” if it spent
wildly to capture and support
customers.
Poor Location: For retailers and
businesses that depend on easy
customer access or visibility, a poor
location limited sales potential.
Customer neglect: Company
failed to support customers or
respond to problems

Inadequate funding: Company
lacked the funding needed to
launch or scale up to the point of
being self-funding.
Poor cash management:
Company spent too much on
nonessentials, failed to balance
expenditures with incoming
revenues, failed to use loan or
investment funds wisely, or failed to
budget enough to pay its bills.
Excessive overhead: Company
created too many fixed expenses
that aren’t directly related to
creating or selling products, leaving
it vulnerable to any slowdown in the
economy.
Poor inventory control: Company
produced or bought too much
inventory, raising costs too high—or
it did the opposite and was unable
to satisfy demand.

Multiple Choice

Who would NOT be considered an entrepreneur?

Chef who just wrote a new cookbook

An accountant who just opened their own practice

A lawyer who started working for the largest firm in the US

Businesswoman who inherited a company from her parents

Multiple Choice

Which is NOT a characteristic of a successful entrepreneur?

Creative

Inquisitive

Goal-Oriented

Procrastination

Multiple Choice

What is a disadvantage of being an entrepreneur?

You have more control over your work

You have a more flexible schedule

You do not always receive a regular paycheck

Your work schedule is always predictable

Government Agencies and Not-For-Profit
Organizations

• Small Business Administration

• Minority Business Development Agency

• Score

• U.S. Chamber of Commerce

Mentors and Advisory Boards

• Advisory board

– A team of people with subject-area expertise or vital

contacts who help a business owner review plans and
decisions

Multiple Choice

An organization that is set up to help those in need, and may make money, but uses it for the sole purpose to further it's goal, not to become rich.

profit business

non-profit business

retail business

Business Incubators and Accelerators

• Business incubators

– Facilities that house small businesses and provide

support services during the company’s early growth
phases

• Business accelerators

– Organizations that work with existing companies with

the primary goal of making them more attractive to
investors

Multiple Choice

Farms, mines, and lumber companies are examples of

builders

manufacturers

trade industries

raw good producers

Multiple Choice

A company that transforms cotton into wearable clothing is considered a

raw goods producer

manufacturer

service business

builder

Multiple Choice

Socially responsibility should be part of the objectives of_____businesses.

all

nonprofit

government

specialized

Multiple Choice

What is the main purpose of incubators?

helping entrepreneurs think of new business ideas

providing entrepreneurs with training to be successful

helping entrepreneurs find investors

providing start up money to a new business in exchange for partial ownership

Multiple Choice

Which of the following is true about nonprofit organizations?

The results of their efforts can be analyzed in the same way as for-profit businesses.

They work in a businesslike way to promote member interests.

Most are informal businesses that are not incorporated.

They make up an insignificant part of the economy

Financing Options for Small
Businesses (1 of 4)

• Seed money

– The first infusion of capital used to get a business

started

• Micro lenders

– Organizations, often not-for-profit, that lend smaller

amounts of money to business owners who might not
qualify for conventional bank loans

Multiple Choice

Startup costs are also known as:

Loan

Investment costs

Seed money

Interest

Multiple Choice

Money raised for a company in exchange for a share of business - think Shark Tank!

Equity

Investment

Seed Money

Debt

Multiple Choice

Business owners can obtain a loan from a credit union.

true

false

Exhibit 6.4

Financing Possibilities over the Life of a Small Business

Financing Options for Small
Businesses (2 of 4)

• Microlenders

– Organizations, often not-for-profit, that lend smaller

amounts of money to business owners who might not
qualify for conventional bank loans

• Venture capitalists (VCs)

– Investors who provide money to finance new

businesses or turnarounds in exchange for a portion
of ownership, with the objective of reselling the
business at a profit

Financing Options for Small
Businesses (3 of 4)

• Angel investors

– Private individuals who invest money in start-ups,

usually earlier in a business’s life and in smaller
amounts than VCs are willing to invest or banks are
willing to lend

• Initial public offering (IPO)

– A corporation’s first offering of shares to the public

Multiple Choice

Which of the following is the right or license to sell a company’s product or service at a designated location?

Partnership

Franchise

Sole proprietorship

Corporation

Multiple Choice

Wealthy individuals who invest in high-potential businesses are...

Banks

Angel Investors

Shareholders

Crowdfunders

Multiple Choice

This is the cash that is generated by the business when it operates successfully

Retained profits

Share capital

Angel investor

Owner savings

Financing Options for Small
Businesses (4 of 4)

• Crowdfunding

– Soliciting project funds, business investment, or

business loans from members of the public

The Franchise Alternative (1 of 2)

• Franchise

– A business arrangement in which one company (the

franchisee) obtains the rights to sell the products and
use various elements of a business system of another
company (the franchisor)

The Franchise Alternative (2 of 2)

• Franchisee

– A business owner who pays for the rights to sell the

products and use the business system of a franchisor

• Franchisor

– A company that licenses elements of its business

system to other companies (franchisees)

Advantages of Franchising

• Combines at least some of the freedom of working for

yourself with many of the advantages of being part of a
larger, established organization

• Name recognition, national advertising programs,

standardized quality of goods and services, and a proven
formula for success

Disadvantages of Franchising

• Typically agree to follow the business format

• Little control over decisions the franchisor makes that

affect the entire system

• Don’t have the option of independently changing your

business in response to market changes

Exhibit 6.5 (1 of 2)

Key Questions to Ask Before Signing a Franchise Agreement

What are the total start-up costs? What does the initial franchise fee cover?
Does it include a starting inventory of supplies and products?

Who pays for employee training?

How are the periodic royalties calculated and when must they be paid?

Who provides and pays for advertising and promotional items? Do you
have to contribute to an advertising fund?

Are all trademarks and names legally protected?

Who selects or approves the location of the business?

Are you restricted to selling certain goods and services?

Exhibit 6.5 (2 of 2)

Key Questions to Ask Before Signing a Franchise Agreement

8. Are you allowed to sell online?

9. How much control will you have over the daily operation of the business?

10. Is the franchise assigned an exclusive territory?

11. If the territory is not exclusive, does the franchisee have the right of first refusal on

additional franchises established in nearby locations?

12. Is the franchisee required to purchase equipment and supplies from the franchisor or

other suppliers?

13. Under what conditions can the franchisor or the franchisee terminate the franchise

agreement?

14. Can the franchise be assigned to heirs?

Source: “Buying a Franchise: A Consumer Guide,” U.S. Federal Trade Commission,

September 2020, www.ftc.gov

Thriving in the Digital Enterprise:
Machine Learning and Deep Learning

• Machine learning

– The general capability of computers to learn

• Deep learning

– A type of machine learning that uses layers of neural

networks to attack problems at multiple levels

Exhibit 6.6

Deep Learning

Applying What You’ve Learned (1 of 2)

1. Highlight the contributions small businesses make to the

U.S. economy.

2. List the most common reasons people start their own

companies, and identify the common traits of successful
entrepreneurs.

3. Explain the importance of planning a new business, and

outline the key elements in a business plan.

4. Identify the major causes of business failures, and

identify sources of advice and support for struggling
business owners.

Applying What You’ve Learned (2 of 2)

5. Discuss the principal sources of small-business private

financing.

6. Explain the advantages and disadvantages of

franchising.

7. Define machine learning and deep learning, and

describe their importance to contemporary business.

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the needs of other instructors who rely on these materials.

Business in Action: Thriving in the Digital
Enterprise

Tenth Edition

Chapter 6

Entrepreneurship and

Small-Business

Ownership

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